Maitland/AMO Morning Monitor – Thursday 4 June 2020
In the news
- The German government has agreed a €130bn fiscal stimulus package bringing in a cut in VAT and other measures. Germany has 7m furloughed workers and is expecting a decline in GDP for 2020 of 6.3%.
- Following the S&P 500’s best 50-day run in its history yesterday, ‘hedge funds are getting ready for another slump in stock markets’, fearing fund managers have become too complacent about how quickly economies can recover.
- Snap, the parent of camera and messaging app Snapchat said it will cease to promote Donal Trump’s account on his platform for “inciting racial violence”.
- The business database provider ZoomInfo raised $935m on Wednesday from an IPO that received strong investor demand, the second signal in 24 hours that the US IPO market is thawing, offering further evidence of pent-up investor demand. Earlier in the day, Warner Music surged 20% on its debut, valuing the music label at $15.4bn.
- HSBC and StanChart publicly backed China’s Hong Kong security law following moves by Swire and Jardine Matheson. Shares in HSBC and StanChart rose by 1.3% and 1.8% respectively in Hong Kong trading.
- In a move seen to be mainly aimed at British Airways, the UK government has reminded airlines “to act with social responsibility” concerning job cuts and a change of terms and conditions while workers are on furlough. British Airways had announced 12,000 job cuts in April.
- Marks & Spencer has cut share awards for two top executives because of sharp fall of the company’s share price.
- FTSE Russell, the global index provider, confirmed yesterday that Avast, GVC Holdings, Homeserve and Kingfisher will be joining the FTSE 100 Index as a result of the June 2020 quarterly review. In the rebalance, Carnival, Centrica, Easyjet and Meggitt will leave the FTSE 100 index and enter the FTSE 250 index.
- China has criticised the UK for “interfering with Hong Kong’s affairs” which “will definitely backfire” urging it to “step back from the brink” and to “abandon its cold war mentality” after Boris Johnson warned the UK had "no choice" but to offer Hong Kong citizens a route to UK citizenship “if China strips them of their freedom”
- German Chancellor Angela Merkel agreed with China’s President Xi Jinping and European Council President Charles Michel on Wednesday to postpone an EU-China summit planned for September.
Stock market moves
- US stocks continued climbing yesterday, despite the racial protests continuing in the country. The Dow Jones Industrial average closed up 2.05% and the S&P 500 rose by 1.36%.
- Despite European PMI indices showing services and manufacturing activity remaining far below average levels, bourses delivered a strong performance with the FTSE-100 rising 2.61% and Germany’s Dax-30 closing up 3.88%.The readings showed a significantly smaller proportion of businesses reporting a fall in output. In the UK the composite services and manufacturing reading climbed to 30 in May from 13.8 in April.
- Asian stocks paused for breath in Thursday trading ahead of today’s ECB decision with Tokyo’s Nikkei rising 0.36% and the Hong Kong Hang Seng barely changed.
- Believing the ‘grand bargain’ agreed by Opec+ oil producers in April which has reduced oil output has done the trick on pricing, Saudi Arabia is contemplating to unwind production cuts bringing 1m b/d back to the market. Brent Crude fell back below $40 p/b with a decline of 1.56% to $39.29.
- The E-Mini S&P 500 Future June 2020 trended 0.38% lower at time of writing.
- The FTSE-100 traded 0.36% lower whereas Germany’s Dax-30 had declined 0.58% at time of writing.
Corporate announcements* Maitland Client
Intermediate Capital Group PLC* Final results for the financial year ended 31 March 2020
- AUM up 22% on 31 March 2019 to €45.3bn, with €10.2bn of new money raised.
- Fund Management Company profits up 27% to £183.1m (2019: £143.8m); average fee rates maintained.
- Final ordinary dividend up 2% to 35.8p per share; total ordinary dividends in the year up 13% to 50.8p per share.
- Outlook: despite the challenges of Covid-19, our business remains resilient with good visibility on future management fees due to the long-term nature of our funds, underpinned by a strong and well-capitalised balance sheet, with £1.2bn of available liquidity.
- Pennon is well positioned with strong funding and liquidity of £1.6bn, prior to receipt of net cash proceeds from Viridor sale, to weather ongoing uncertainty.
- Solid financial and operational performance across the Group, in line with management expectations, delivering for all our stakeholders, well positioned for K7 (2020-25).
- Financial impacts for 2019/20 focused on expected credit losses – related to customer debt – provision of £9.0m across the Pennon Group.
- Chris Loughlin, CEO, said: “It has been a landmark year for Pennon, culminating in the announcement in March of the proposed sale of Viridor to KKR for an Enterprise Value of £4.2bn. Viridor has become a leader in engineering excellence, new technology and tackling environmental challenges, and the transaction recognises the strategic value that has been created over many years, accelerating the realisation of that value for shareholders. Following the sale, Pennon will be a leading UK-focused water infrastructure group, delivering for customers and providing services in the most efficient and sustainable way possible. We are pleased to announce our Continuing Group dividend policy of CPIH + 2% growth per annum through to 2025, with additional returns to shareholders to come from the sale of Viridor.”
- Due to extension of the closure of cruise ports in regions around the world and other factors impacting international travel, Princess Cruises is extending its pause in cruise operations with respect to several of its voyages.
- All of the Group’s manufacturing and logistics facilities are currently operational.
- The group’s local supply chains in China and Vietnam are working at pre-COVID-19 capacity levels.
- The group states that trading during April and May 2020 has been encouraging. Order intake in April and May continued to be strong, building on the levels seen in Q1 and the Group will enter H2 2020 with a healthy order book.
- The Group has seen exceptional levels of demand from its Healthcare customers and is working hard to actively deliver the related order backlog.
- The group states that its strong order book gives good near-term visibility, but high levels of economic uncertainty and general market volatility continue to provide a wide range of potential outcomes for 2020.
- Group revenue grew 1% and included a 5ppt reduction from events cancelled as a result of covid-19.
- Adjusted profit before tax declined 15%, primarily impacted by events cancelled due to covid-19 and Asset Management decline.
- Robust balance sheet with net cash £8.1m at 31 March 2020.
- Andrew Rashbass, CEO, said: “Euromoney’s 3.0 strategy delivers must-have, embedded content. This strategy has never been more relevant and drives the momentum we see across our businesses. We have underlying growth in two of our three segments; strong performance in Pricing, and good growth in Data & Market Intelligence following our investment in that segment; and we see promising signs that our turnaround plan for our Asset Management businesses is working. We have taken swift action to address and manage the impact of covid-19, which creates short-term uncertainty in our business, particularly our events. We are ready to run our market-leading events when restrictions on face-to-face gatherings are lifted; until then, we will run virtual events where they deliver value to clients. Our strong balance sheet and resilient renewal rates in our subscription businesses, which make up two thirds of revenues, give us confidence that we will emerge strongly from the current global crisis”.
- Since the group’s Q4 trading update, financial market volatility has remained elevated and the Group has continued to see high levels of client trading activity.
- Net trading revenue in Q4 FY20 is now estimated to be approximately £259m (Q4 FY19: £117.9m), with full year net trading revenue anticipated to be approximately £649m (FY19: £476.9m).
- The Board recommends a final dividend of 4.25 pence per share, an increase of 10.4% to the prior year.
- The Company recorded a NAV total return of -5.9% and share price total return of -6.5%. The discount to NAV moved over the period from 7.9% to 8.6%.
- April 2020 marked the Company’s 10th anniversary. Over the decade the NAV has increased by 160.8%, giving an annualised total return of 10.1%. The share price increased by 138.6%, giving an annualised return over the decade of 9.1%.
- The company today updates on actions to improve the cost efficiency of the business, in alignment with its strategic plan to deliver profitable growth, operating as a true luxury car brand.
- The plan requires a fundamental reset which includes a planned reduction in front-engined sports car production to rebalance supply to demand. Aston Martin will shortly launch a consultation process on proposals to reduce employee numbers by up to 500.
- The associated cash restructuring costs are expected to be c.£12m in 2020.
- Significant restructuring actions to position the Group for a sustainable future, including the closure of a further 12 sites and headcount reductions across the business, to deliver annual savings of approximately £50m.
- Net debt of £57m at the end of May with a facility of £250m and property portfolio with an adjusted net book value of £325m at 31 December 2019.
- As a result, the Group has taken the difficult decision to commence redundancy consultations across all areas of the Group which could, subject to consultation, result in approximately 1,500 redundancies.
- Outlook: Given the ongoing uncertainties faced by the Group in the early days of reopening the business, the Board continues to believe that it is too early to make any reasonable estimate of the financial impact on the Group during 2020 and beyond.